Immunomedics up; OSI rebounds; Celgene retreats; Protein Design Labs, Novavax, Cephalon all up

By Ronda Fears

Nashville, Sept. 13 - Primary market activity took a back seat to trading action among biotech names Tuesday as several names moved on Food and Drug Administration panel votes or anticipation thereof.

As players await follow-on stock deals later this week from Geron Corp. and Myogen Inc., the closing of Protein Design Labs Inc.'s collaboration with Biogen Idec Inc. - worth $100 million in all - pushed its shares higher by nearly 2%.

Protein Design Labs shares gained 57 cents on the day, or 1.95%, to close at $29.75 and a convertible trader noted some activity in the 2.75% convertibles, which are deep in the money, with the issue up 1.75 points.

Cephalon Inc. also was a big gainer, with the sellside trader mentioning nice volume in its 2% convertible bonds as well as the stock. The trader said players are making their move in anticipation of several data points coming up in the next 12 to 18 months. Cephalon shares rose $1.26, or 2.99%, to $43.37, and the trader pegged the 2% notes due 2015 at 106.25, up about 0.75 point.

Novavax spikes on flu pact

With autumn coming on swiftly, which means the onset of vaccinations, Novavax Inc. surged 20.5% in pre-market action on news it would collaborate with closely held Wave Biotech LLC on development of a commercial scale production process for its pandemic influenza virus vaccine.

The stock came off the day's high of $1.84, which was hit before the opening bell rang, to close Tuesday up 21 cents, or 13.91%, at $1.72.

Financial terms were not disclosed, but the companies said the pact initially will focus on Novavax's H9N2 avian flu vaccine, which Novavax said has shown promising results in pre-clinical studies.

Wave Biotech is a private firm based in Somerset, N.J., that focuses on development of disposable manufacturing technology.

OSI Pharma view improves

Even before news late Tuesday that an FDA advisory panel had voted 10-3 to recommend approval of OSI Pharmaceuticals Inc.'s application to expand use of its lung cancer drug Tarceva to treat pancreatic cancer, the stock had rebounded sharply from the previous day's dive.

The FDA will make the final decision, but the agency usually follows recommendations from its advisory panels.

OSI Pharma fell 5% on Monday as the market interpreted briefing documents to suggest the application would be rejected. But even before the vote hit the tape, players were taking a better view of OSI Pharma without it. Bear Stearns analyst Akhtar Samad helped assuage the immediate harsh reaction to the FDA staff's opinion, saying that an approval in pancreatic cancer was not seen as a major revenue opportunity or near-term driver for OSI Pharma shares anyway.

On Tuesday, OSI Pharma shares closed up $1.41, or 4.59%, at $32.15 after plunging to a new 52-week low of $30.74 on Monday. In after-hours activity, the stock moved up another 35 cents, or 1.09%.

Celgene gives back 5%

Celgene also was awaiting an FDA panel vote, anticipated Wednesday, and retreated as analysts suggested the market had over-reacted from the opposite end of the spectrum.

The stock gave back $2.77, or 4.97%, to close Tuesday at $52.91 after gaining a whopping 10% the day before on positive statements in briefing papers filed by FDA staff ahead of the meeting on its Revlimid application.

Approval is not assured, but looking more likely, analysts said, and some are anticipating that Revlimid could generate peak sales of $1 billion or more.

"The market seems to have gotten ahead of itself on this one," said a stock trader. But, he added that after-hours trading in Celgene shares suggested there was "going to be a second run in the stock before the [FDA panel] vote."

In after-hours activity, Celgene shares were seen up 68 cents, or 1.29%, he noted.

FDA staff indicated a positive vote for Celgene's application for Revlimid, which is being developed for the treatment of transfusion-dependent anemia linked to a form of blood cancer. Celgene is testing the drug in the treatment of myelodysplastic syndrome in patients with the 5Q - chromosomal mutation.

Celgene also expects to file a New Drug Application for Revlimid in multiple myeloma in early to mid-October.

Angiotech off on acquisition

Angiotech Pharmaceuticals Inc. said on Tuesday that it has agreed to acquire Afmedica Inc., a private company developing perivascular technology using the drug rapamycin to treat peripheral vascular disease, coronary artery disease and end-stage renal disease.

Terms of the transaction were not disclosed, and buyside market sources were divided on the news, which some suggested was an indication that Angiotech's heart treatment paclitaxel was not seeing great success.

Angiotech shares lost 26 cents on the day, or 1.92%, to close at $13.31.

On the Pro side of the news, one buyside source said that even if the news is an admission that paclitaxel is not working as planned, "the Afmedica transaction strengthens Angiotech's market leadership with respect to its Vascular Wrap product development program ... The transaction enables Angiotech to potentially expand its research platform with rapamycin in perivascular and other selected disease indications."

On the Con side, another buysider said in addition to the negative connotation from the news, there has been some big institutional selling in Angiotech that has compounded pressure on the stock.

"It has taken some time for the clinical evidence to accumulate, but the recognition that paclitaxol is at best an unremarkable anti-proliferate is widely appreciated in the clinical community," the buyside source said. "Momentum is building behind the idea that it may in fact be somewhat inferior from a safety standpoint. Management is essentially acknowledging these facts by buying a competitor with an entirely different drug."

Vancouver, B.C.-based Angiotech, a specialty pharmaceutical company, said it expects to complete the acquisition in the fourth quarter. Its lead product is a coronary stent system incorporating the drug paclitaxel for the treatment of coronary artery disease.

Immunomedics pushed up 5.5%

Immunomedics Inc. was up big on a reading of its 10-K filing Monday in which the company said it is looking at raising funds for its research and development program sometime in the next 12 months or sooner, including a search for collaborative marketing and distribution agreements.

The stock gained 11 cents on Tuesday, or 5.53%, to close at $2.10.

"There are many parts to the story. The first part is plainly visible to everyone. All you need to do is read the 10-K. There are some very interesting developments that have slid under the radar screen," said a sellside trader.

"There's a buyer in the market by the way, actually a bunch of smaller ones buying on some info that's brewing. Some sort of partnership/merger situation might be in place is dead wrong on the short term, but there are deals being discussed based on positive outcome results with [late-stage clinical trials], which would mean a manufacturing/marketing partnership."

Morris Plains, N.J.-based Immunomedics is focused on diagnostic imaging and therapeutic products for the detection and treatment of cancer, autoimmune and other diseases.

For the current fiscal year, which ends June 30, 2006, Immunomedics said it does not believe it will have adequate cash at this expected spending level to fund R&D programs through the next year and if additional funding cannot be secured soon it will curtail programs and costs.

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